The founder of two defunct software companies reflects on growing too fast, staying small, and facing losses.
Dan Bricklin, creator of a prototypical hot company of the '80s, reflects on growing too fast, staying small, and separating yourself from your company
Though not yet 40, Dan Bricklin has already lived through at least two complete business lives. A graduate of the Massachusetts Institute of Technology and Harvard Business School, he teamed up with Bob Frankston in 1978 to create the product that some say put the Apple computer on the map: VisiCalc, the first electronic spreadsheet. The pair also started Software Arts Inc. to develop new versions of VisiCalc, which were then marketed by another company, VisiCorp. On the strength of the product, both companies took off, becoming two of the new industry's early fast-growth stars. In four-and-a-half years Software Arts ballooned to 125 employees and about $10 million in annual sales.
Unfortunately for Bricklin, Software Arts never grew into the company it seemed destined to become -- which is to say it didn't become Lotus Development Corp. In 1983 VisiCalc was swept aside by Lotus's hot new spreadsheet, Lotus 1-2-3, designed specifically for the IBM PC. Before long, Bricklin was dealing with indignities often suffered by companies in decline: cataclysmic layoffs, a fire sale of company assets, and a bitter legal battle with VisiCorp, which brought suit against Software Arts. Although Bricklin and Frankston eventually won the case and negotiated the sale of most of the company's assets to Lotus, Software Arts achieved a dubious renown as one of the legendary failures of the nascent industry.
Bricklin then spent a few months consulting for Lotus, watching from the inside as that company showed its first signs of stumbling. Meanwhile, he was thinking about questions of growth and size. His reflections led him to choose a different path for his next venture, Software Garden Inc., which he founded in 1985 to develop and market a package called Dan Bricklin's Demo Program. His explicit goal was to keep the business lean as bone -- "to see how little I could get away with." For a while the company occupied a spare bedroom. His staff size peaked at three. He himself took orders, filled out credit-card slips, and stuffed products into envelopes.
It worked. The program won awards from the Software Publishers Association and sold well, and the business made money. By 1988 Bricklin had taken Demo as far as he wanted, so he sold it to Peter Norton Computing for an undisclosed sum. Bricklin will say, however, that in the end he made just about as much money on Demo as he did on Software Arts. Satisfied with that accomplishment, he began to work on a new product -- and to contemplate where he'd been and where he wants to go.
Inc. editors Bo Burlingham and Michael Hopkins talked with Bricklin at his office in Newton, Mass.* * *
INC.: It must be pretty hard to help launch an industry and then watch your company get swallowed up by it.
BRICKLIN: Yes, I'd say that it was hard at times.
INC.: Did you learn anything from it?
BRICKLIN: I learned that you have to be able to separate yourself from your company. If your company has problems, you can't let them get to you personally. And that's a very difficult thing to learn, because it feels as though the world is crashing down on you. But the sun still comes up the next day.
INC.: At what point did you realize the importance of that lesson?
BRICKLIN: When Software Arts was about to disappear.
INC.: But by then the company had been struggling for quite a while. How did you get through that?
BRICKLIN: Well, of course, the support of family and friends was important, and I'm not averse to seeking professional help, either. I had actually established a good relationship with a psychologist when the company was successful. I thought it was great, having somebody I could complain to all the time. That was definitely helpful. Then things started to go sour. I came in one day and said, "Guess what?" Thank god, there was somebody to talk to about it. At the time we couldn't talk about a lot of things for legal reasons, but discussions with a psychologist are privileged. So I could talk freely to my lawyer and my shrink.
INC.: It wasn't a secret that the company was having problems, was it?
BRICKLIN: No, no. Not at all.
INC.: So how did you deal with your colleagues in the industry?
BRICKLIN: That's actually an important point. When things started going downhill at Software Arts, I made a decision not to go into a closet and hide. I kept going to industry meetings. I remember I went to [industry analyst] Esther Dyson's conference. It was Pioneer Day, so I rented a coonskin cap and a musket. I found people were very supportive. I also went to SoftCon, the industry trade show, may it rest in peace. Not only were people nice, but I ran into [Lotus founder] Mitch Kapor on the plane. He asked me, "How are things going?" I said, "Lousy." We talked about it, and that conversation eventually led to the deal in which Lotus acquired most of Software Arts.
INC.: So the lesson is . . .
BRICKLIN: The lesson is, don't crawl under a rock. Don't hide. You've got to try to take a positive attitude. I even showed up at the auction for Software Arts and sold T-shirts off my back. And then I also had the slide show, which was very helpful.
INC.: The slide show?
BRICKLIN: I had a slide show about Software Arts, which I'd been doing since the early 1980s. I'd been asked to speak at an Alex. Brown & Sons conference. So I'd taken some snapshots and put together the show. My spiel was "We're a little company, and in case you've forgotten what a little company is all about, this is it. We were born in an attic." Zoom to a shot of the attic. And so on. Well, people liked the slide show, so I kept showing it to groups, updating it as I went along.
INC.: How did that help you cope with the demise of Software Arts?
BRICKLIN: I was invited to speak at the New York City IBM PC Users Group in September 1985. By then Lotus had acquired Software Arts, and I'd left to start my new company, Software Garden. I decided to update the slide show again. First, I showed Software Arts going to the peak. Then I showed it going downhill, leading to a big layoff. I had pictures of the badges people turned in. I went on with the story about the lawsuit and the sale to Lotus. Should I go to work for Lotus? Pictures of the big Lotus building. No, I decide to start Software Garden in-stead. Slides of my home, where I was working at the time, and of the desk in the guest room, all piled up with equipment.
INC.: How did people respond?
BRICKLIN: They loved it. They came up to me afterward and gave me such hope. They said, "That was me. That was me going from the bottom to the top and crashing down again. It's great you're starting over and have such a positive attitude." I found there's real support for people who are successful, fail, and then try again. So I kept doing the slide show and adding things. I showed my product, Dan Bricklin's Demo Program. Then the product took off and got some recognition. The next time I added, "Well, I win awards." That was so meaningful to me -- to have my peers give me an award for my new product. And it was selling well, so I knew it wasn't a fluke. I'd been rehabilitated. Meanwhile, I continued to go to industry conferences. And I started seeing more and more people who used to be on top and had fallen. They were back at conferences, and everybody still liked them and played charades with them, even though they had new jobs at other companies. So I saw the whole cycle -- that your company and you are not one.
INC.: It's a curious thing that you regarded Software Arts as a great failure and yet you never filed for Chapter 11, did you?
BRICKLIN: No, the company ended up with a positive net worth. But it did not achieve our main goal, which was to last forever. And that, you know, is one reason to have a company -- although I've since changed my ideas about what a company's goals should be.
INC.: How so?
BRICKLIN: I think that, in many cases, you should set up a company around a product, and the goal should be to get the most out of the product over its life span. Sometimes that may even involve ending the company at a certain point. Of course, companies that are built around a super product can be immensely profitable and can last a long, long time. But most companies don't have that kind of product. I see lots of examples in your publication. I see products that have a limited life span -- less than 10 years, maybe even less than three years.
INC.: That's an interesting way of thinking about a business.
BRICKLIN: It means that you really have to decide why you're in business and whether you have the product that will get you where you want to go. Are you there because you want to grow the company, because you like the growth experience? Are you building a company because you want it to last forever? Are you there to make money? Or are you there to have a certain lifestyle and get the most out of your product? Those aren't necessarily the same things.
INC.: But they aren't mutually exclusive, either. Certainly it is possible to make money, have a growing business, and build a long-term company at the same time. Look at [Microsoft Corp. founder] Bill Gates.
BRICKLIN: You're right, but remember, Microsoft has a cash cow, MS-DOS, and Bill Gates is an extraordinary person. He invests in new products and just keeps plugging away until he wins, and he has the money to do it. Most companies don't have that luxury.
INC.: Software Arts, for example?
BRICKLIN: When we started Software Arts, we had no idea what was what. The industry hadn't been around long enough to see a product life cycle. We had no models for a software company, so we operated on the book-publishing model, which turned out to be wrong. We thought we could just develop neat products and sell them -- without realizing that different organizations were needed for different types of products. We didn't appreciate that the overhead appropriate for one product might be totally inappropriate for another. So there was a lot of waste. I could see it in my company, and I saw it even more when I did consulting for Lotus. It wasn't purposeful. People just didn't understand what was necessary and what wasn't.
INC.: What do you mean?
BRICKLIN: I mean it was unclear what made you successful. Was it your documentation? Was it your packaging? Was it because you did good testing or advertised a lot or treated your employees well? I remember Lotus came out with Jazz, which had this incredible packaging. I don't know if it won any design awards, but it should have. The people at Lotus had to overcome great adversity to get it out, and they were all patting themselves on the back, saying, "We're successful because we always do the best job possible, no matter what the expense." Well, Jazz was a failure as a product. I read about [Lotus president] Jim Manzi saying it was such a failure that they shipped 62,000 copies the first month and got 64,000 back the second. He was joking that they even got bootleg copies back. So all the great packaging was a waste. We had pretty similar experiences at Software Arts.
INC.: Did any of this affect your decision to start Software Garden?
BRICKLIN: It had a big effect. See, I had also been looking at some smaller software companies -- Peter Norton Computing, Funk Software, and others. Paul Funk is in Cambridge. I visited his place, and I was amazed. He had about six people at the time, and his company was doing a few million dollars in sales. I think he was at more than $300,000 per employee, and Norton was even higher.
INC.: Compared with what?
BRICKLIN: In our industry, if you get up above $200,000 per employee, you're probably minting money. Now it depends a bit on how you count employees. But no matter how you counted, Funk and Norton were doing great, and they made a big impression on me. I saw they had companies that were just big enough for their products, while other companies were trying to grow past their products, anticipating what their earnings might be. But until you know how successful your product is or what it requires, you don't really know what size company you should have. Because in software everything revolves around the product -- the type of sales force you need, the marketing, the technical support, the documentation.
INC.: Can you give us an example?
BRICKLIN: Say you're selling a word-processing program to new users. You're probably going to need a lot of technical support because you're going to get a lot of calls. If you're selling to programmers, you don't, and it would be a waste to have such a big tech-support staff. Are you going to sell 100,000 units a year or 1,000 units? You can be profitable either way, but you need to structure your company differently.
INC.: So how did this affect your thinking about Software Garden?
BRICKLIN: I saw these little guys, who were growing but keeping lean and mean -- they didn't put any extra stuff in. I saw other companies doing the same dollar volume, but they had all this extra overhead. They were throwing money on the floor. So I began wondering how much overhead you could get rid of and still be successful. Could you get it down to a one- or two-person company? I wanted to see how little I could get away with. I also wanted to learn about the industry, because I had lost track of what was really going on down in the trenches.
INC.: Did you think about possibly staying at Lotus?
BRICKLIN: Yes, and Lotus wanted the product, but I figured I could do better by myself, if I followed the Norton-Funk model and if Demo was reasonably successful. Plus, it's a lot more fun to be on your own.
INC.: More fun?
BRICKLIN: It's more fun for me. I'm an M.B.A. -- a generalist. Everything about business is interesting to me. My father is a printer, so the graphic and production side is interesting, too. I'm a programmer. I have a bachelor's in computer science from MIT. I have fun doing everything. I like to learn about everything. The smaller you are, the more you can learn about firsthand.
INC.: So you're talking about the joy of learning.
BRICKLIN: Well, I also like being president. I mean, the president of a small company can hobnob with the president of a big company. But the assistant vice-president of a big company doesn't hobnob that much with the presidents of big companies or little companies. So that was a factor. And there were also personal lifestyle issues. I want to be able to choose where I work, how far I commute, all that stuff.
INC.: Wait a minute. You're saying you started Software Garden with the goals of making money, learning about the industry, and having fun. Couldn't you have done all that by starting a company you intended to grow like mad? Why did you have to limit growth?
BRICKLIN: Well, for one thing, growing like mad takes up an awful lot of your time, which can get in the way of all three goals. And there's a tendency to solve problems with money and people if you can afford to. You hire people to do things you haven't learned to do well yourself. You can't help making some mistakes -- everybody does. Then those people hire other people and compound your mistakes. That leads to waste and turnover and bad morale.
INC.: Isn't the solution just to pay attention, spot the mistakes, and fix them?
BRICKLIN: That's not always easy. Growth throws up all kinds of distractions. My partner, Bob Frankston, and I spent a lot of time working on things at Software Arts that, in retrospect, weren't very important to the success of the business, while the important stuff was being done by other people. Those people made the manufacturing decisions, the marketing decisions, the technical decisions.
INC.: What were you doing?
BRICKLIN: We were focusing on other things. For example, we decided to buy a building, which made sense because we were growing and we needed the space. Besides, it was a good investment. But a lot of top-management time went into negotiating the financing and then designing the environment. That was a waste. We should have been watching the company. This is a fast-paced industry, and you've got to stick to the knitting, and we didn't stick to it closely enough.
INC.: Are you saying that waste is an inevitable consequence of growth?
BRICKLIN: Not necessarily. I'm just saying I wanted to do something different at Software Garden. I wanted to take a minimalist approach, to be lean and mean. I wanted to constantly throttle back and ask, How can I minimize the number of people I need? I've learned an awful lot of things that way, and it's been good for customers, too.
INC.: How's that?
BRICKLIN: For example, we did an upgrade for thousands of customers with only one person doing the fulfillment. And we figured out how to cut the order-processing time in half by having our customers fill out the mailing labels. I got that idea from another company. At Software Garden I spend much more time talking to other companies and other presidents than I did at Software Arts. There's no better way to learn how to do things right.
INC.: Tell us about that.
BRICKLIN: Oh, I've learned all kinds of things by hobnobbing. How to find the right vendors. How to think about pricing. How to approach distributors. What kind of deal you can do with this or that company. Somebody will say, "Oh, you're dealing with so-and-so. Well, they'll drop this clause if you ask them." I would never have known that otherwise. You only pick up those things from other companies. That's why I'm involved in so many trade organizations. They are a great help when you're trying to be lean and mean.
INC.: You use that phrase an awful lot. What exactly do you mean by "lean and mean"?
BRICKLIN: It just means you use zero-based budgeting, that you think about every cent you spend and question whether it's necessary to get you where you want to go. Once you get bigger, you can take more risks with expenses. I don't question mine as much as I used to. But I'm still lean and mean compared with other companies.
INC.: How much was all this dictated by necessity? Were you really strapped for cash when you founded Software Garden?
BRICKLIN: No, I had enough money to last a year, because I could always go back to consulting. As it turned out, I went four months without any income -- from September through December 1985. We were profitable in January. It cost about $10,000 to launch the company.
INC.: Is that what you expected?
BRICKLIN: No, I expected the product to come out in October, but it always takes longer than you expect. I figured I could go a year before I'd try something else. In a pinch, I could always take a second mortgage on my house, although I don't recommend that. Fortunately, my lifestyle wasn't so high that I couldn't drop back if necessary.
INC.: That's probably an important factor.
BRICKLIN: It's very important. I tell M.B.A. students that the best time to start a business is when they get out of school. Not because they know so much, but because they're used to living like students.
INC.: Shouldn't they acquire some experience first?
BRICKLIN: Yes, but you have to watch out. While you're acquiring the experience, you may develop such an expensive lifestyle that you can't afford to take risks. You build up too much overhead in your personal life, and you can't drop back for a year or whatever it takes to get a business off the ground.
INC.: Still, it sounds as though your lean-and-mean approach is more a matter of principle than necessity.
BRICKLIN: That's true.
INC.: How did you apply it in practice?
BRICKLIN: Take our stationery and packaging. I decided I wanted something I could buy at the local copy shop, so my lead times would be short, but I was willing to put some money into a professionally designed logo, because I still wanted to connote quality. I hired a designer, and he gave me 10 designs with sketches. Rather than go back and forth with him, I just chose one. I said, "OK, this one is fine. Go with it." As it turned out, we won an award for the design. Yet it was very inexpensive -- well, a little more than $1,000, but it was worth it.
INC.: It's interesting. You said before that you didn't focus enough on the product at Software Arts. Now, you seem to spend almost all your time focusing on the product.
BRICKLIN: No, not really. I actually spend a significant portion of my time in public relations. I go to industry meetings. I talk to the press. I budget my time to hit the right parties on the cocktail circuit. Why? Because I've decided that -- rather than just advertising -- I can do a lot of my marketing with PR. That's a big part of my time. I'm also involved in industry stuff, such as intellectual property, which really doesn't affect my company in the short term.
INC.: But you could say that the PR is devoted to moving product.
BRICKLIN: Maybe in the long term, but not in the short term. Fortunately, I can afford to think long term because my products have been successful, and I've learned it pays off.
INC.: Let's step back a minute. You agree that this lean-and-mean approach is a matter of principle for you. Why is it so important?
BRICKLIN: For one thing, I believe you can tolerate more adversity if you have less overhead. That's one reason I worry about leveraged buyouts. I also think there are certain benefits to staying as small as possible.
INC.: Such as?
BRICKLIN: Such as flexibility. I make midcourse corrections all the time. I've had my heart set on certain things about a product and then done total about-faces based on arguments from three or four test sites. At first, I've resisted. I've said, "No, no, no." But the people doing the testing have convinced me, and I've been able to turn the whole organization around because we were just two or three people. I don't know how I'd do that in a bigger company -- making sure you're sensitive to information from the outside. You need somebody to be a kind of gatekeeper, to decide what to take in and then to get the whole organization to act on it.
INC.: Any other benefits you can see to being small?
BRICKLIN: I think it's always good to be a customer in your market, so that you can think like a customer. At Software Garden I've been able to sense changes in distribution patterns, for example. I was buying from PC Connection before mail order was recognized as an important distribution channel. So I could make decisions based on that knowledge. Before, at Software Arts, we had purchasing people. I was removed from the market.
INC.: But aren't there ways to avoid that pitfall?
BRICKLIN: Yes, but first you have to be aware of the pitfall.
INC.: Let's rephrase the question. Can you be a fast-growing company and still be lean and mean?
BRICKLIN: Oh, sure. Look at WordPerfect. They're real lean and mean, and they grew like crazy. For example, they realized they had to provide technical support. So they decided to offer customers a free, unlimited 800-number service with the package. That sounds extravagant, and it could have been, too. They needed 200 people to handle the phones. So what did they do? They hired the spouses of Brigham Young University students to do their tech support. It wound up costing them about $8 per sale to provide the service. Well, $8 is nothing on an item that costs several hundred dollars, especially if it gives you a big advantage. That's lean and mean. They put the money where it was appropriate. So you can run a growing company this way. In fact, I'm thinking about trying it myself.
INC.: You are?
BRICKLIN: Yes, because of a new product I'm developing. If it's at all successful -- not even wildly successful, just moderately successful -- we will probably have to grow.
INC.: Can you tell us what the product will be?
BRICKLIN: No, I can't say yet. But it's a utility for the IBM PC, and it'll be out by the end of the summer.
INC.: How do you feel about the prospect of building another growing company right now?
BRICKLIN: I find it scary.
INC.: A growing company is scary?
BRICKLIN: No, no. A growing company is fun. It's adrenaline. It's exciting. But it does take up a lot of your time to do it right. I just don't know if I want to make the commitment to the particular company this one would become. And I would have to be committed to it. When you make the decision to grow, you're committing yourself to go wherever the company goes and to invest yourself in it.
INC.: How old are you?
BRICKLIN: I'll be 38 this summer, and I know these products can last 5 or 10 years. Do I want to be hitting my fifties after spending a decade with this new product? I have other things I want to do.
INC.: I guess a growing company looks different when you're pushing 40 than it does when you're 25.
BRICKLIN: Oh, sure. When you're in your twenties, you feel you can do it a million times. Your life is far ahead of you. You never ask, "Where is this going to lead?" Now, I realize I can do it a few more times, assuming I work into my sixties. I have to decide if I want to waste a whole cycle on something like this.
INC.: Are you questioning whether you want to do another growing company at all?
BRICKLIN: No, I'm definitely going to do one at some point.
BRICKLIN: It's fun, and it's a challenge. I mean, how do you grow fast and be successful when everyone's stretched to the limit? Lotus was like that for a long time. They were growing like crazy, but they were much smaller than they needed to be. Then they got bigger than they needed to be. So it's a difficult balance. I don't know how you do it. But I do know you shouldn't be big just for the fun of being big. It reminds me of biblical stuff.
INC.: How's that?
BRICKLIN: In the Old Testament, the king derives honor and splendor from the number of people he has. He must not have too few. That's one reason Jews prefer communal prayer over individual prayer. You honor God with lots of people. There's honor in having lots of people.
BRICKLIN: So you have to remember it's honor you're getting from having all these people in your company. It's not necessarily efficiency.